You should read the following discussion and analysis of financial condition and
results of operations in conjunction with the consolidated financial statements
and related notes appearing elsewhere in this Report.
We were originally incorporated in Nevada on September 11, 2006, under the name
The Engraving Masters, Inc. (the "Company").
On May 2, 2014, we changed our name to Blue Line Protection Group, Inc.
We provide armed protection and transportation, banking, compliance and training
services for businesses engaged in the legal cannabis industry. During the three
months ended March 31, 2021 substantially all of our revenue was derived from
transportation and currency processing services.
It is estimated that the total market for marijuana, legal or otherwise, will
exceed the economic value of corn and wheat combined. Marijuana is widely
considered the largest cash crop in the United States. Businesses have been
positioning themselves for years, each trying to establish a leadership position
in the legal marijuana industry.
Cultivation facilities are the producers of legal cannabis that eventually make
its way to consumers. Growers' operations typically span a large geographic
footprint, making them susceptible to theft, as are shipments from the growers
to testing laboratories or to retail dispensaries. Additionally, due to current
federal marijuana legislation and banking environment, growers are finding it
increasingly difficult to secure their cash, purchase equipment and obtain
financing for expansion.
Dispensaries are the retail face of the legal cannabis industry. All legal sales
of cannabis products are transacted through dispensaries that are
state-licensed. To maintain their licenses, dispensaries must comply with a
variety of state-mandated reporting requirements, including reporting every gram
of cannabis passing in and out of the store. Dispensaries also face financing
and banking challenges similar to those that growers encounter.
We do not grow, test, transport or sell marijuana.
Armed Protection and Transportation
Fundamental to the legal cannabis industry is the protection of product and cash
throughout the distribution channel. Growers ship product from their cultivation
facilities to independent laboratories where it is tested for compliance with
state-mandated parameters. From the labs, the product is then delivered to the
retail dispensaries, where it is sold to the public.
Due to the current banking and regulatory environments, payments between each
step in the distribution network are made in cash: from the customer back to the
grower. Therefore, these businesses are forced into having to transport bags of
money between growers and dispensaries and their own vaults or storage
The risk of theft of cash and product is present at every stage, even when they
are not in transit. Accordingly, all cannabis businesses require security
measures to prevent theft, mitigate risk to employees and maintain regulatory
We began our security and protection operations in Colorado in February 2014.
Since then, we have become the largest legal cannabis protection services
company in the state. We offer a fully integrated approach to managing the
movement of cannabis and cash from growers through dispensaries via armed and
armored transport, money processing, vaulting and related credit. Money
processing services generally include counting, sorting and wrapping currency.
As of December 31, 2019 we discontinued our Service-Guards segment.
We also offer security monitoring, asset vaulting, and VIP and dignitary
Results of Operations
Material changes in line items in our Statement of Operations for the three
months ended March 31, 2021 as compared to the same period last year, are
Increase (I) or
Item Decrease (D) Reason
Revenue I Increase in customers
Operating expenses D Reduction of staff and overhead
Gain on settlement of accounts D
Interest expense I
Loss on change in fair value of I
Capital Resources and Liquidity
Our material sources and <uses> of cash during the three months ended March 31,
2021 and 2020 were:
Cash provided (used) by operations $ 323,694 $ 63,799
Loan proceeds - 24,000
Loan payments <39,371> <35,699>
As of June 8, 2021 we did not have any material capital commitments other than
Other than as disclosed above, we do not anticipate any material capital
requirements for the twelve months ending March 31, 2022.
Other than as disclosed above, we do not know of any:
? trends, demands, commitments, events or uncertainties that will result in, or
that are reasonable likely to result in, our liquidity increasing or
decreasing in any material way; or
? any significant changes in our expected sources and uses of cash.
We do not have any commitments or arrangements from any person to provide us
with any equity capital.
During the next twelve months, we anticipate that we will incur approximately
$1,200,000 of general and administrative expenses in order to execute our
current business plan. We also plan to incur significant sales, marketing,
research and development expenses during the next 12 months. We must obtain
additional financing to continue our operations. We may not be able to obtain
additional funding on terms that are favorable to us or at all. We may not be
able to obtain sufficient funding to continue our operations, or if we do
receive funding, to generate adequate revenues in the future or to operate
profitably in the future. These conditions raise substantial doubt about our
ability to continue as a going concern.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements.
Critical Accounting Policies
Management considers the following policies critical because they are both
important to the portrayal of our financial condition and operating results, and
they require management to make judgments and estimates about inherently
Accounts receivable. Accounts receivable are stated at the amount we expect to
collect from outstanding balances and do not bear interest. We provide for
probable uncollectible amounts through an allowance for doubtful accounts, if an
allowance is deemed necessary. The allowance for doubtful accounts is our best
estimate of the amount of probable credit losses in our existing accounts
receivable; however, changes in circumstances relating to accounts receivable
may result in a requirement for additional allowances in the future. On a
periodic basis, management evaluates our accounts receivable and determines the
requirement for an allowance for doubtful accounts based on its assessment of
the current and collectible status of individual accounts with past due balances
over 90 days. Account balances are charged against the allowance after all
collection efforts have been exhausted and the potential for recovery is
Revenue recognition. In May 2014, the FASB issued ASU No. 2014-09, "Revenue from
Contracts with Customers (Topic 606)," which supersedes the revenue recognition
requirements in Accounting Standards Codification 605, "Revenue Recognition."
This ASU is based on the principle that revenue is recognized to depict the
transfer of goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those
goods or services. The ASU also requires additional disclosure about the nature,
amount, timing and uncertainty of revenue and cash flows arising from customer
contracts, including significant judgments and changes in judgments and assets
recognized from costs incurred to obtain or fulfill a contract. ASC 606-10-50-5
requires that entities disclose disaggregated revenue information in categories
(such as type of good or service, geography, market, type of contract, etc.)
that depict how the nature, amount, timing, and uncertainty of revenue and cash
flow are affected by economic factors. ASC 606-10-55-89 explains that the extent
to which an entity's revenue is disaggregated depends on the facts and
circumstances that pertain to the entity's contracts with customers and that
some entities may need to use more than one type of category to meet the
objective for disaggregating revenue. In August 2015, the FASB issued ASU No.
2015-14, which deferred the effective date of the new revenue standard by one
year, and allowed entities the option to early adopt the new revenue standard as
of the original effective date. There have been multiple standards updates
amending this guidance or providing corrections or improvements on issues in the
guidance. The requirements for these standards relating to Topic 606 are
effective for interim and annual periods beginning after December 15, 2017. This
standard permitted adoption using one of two transition methods, either the
retrospective or modified retrospective transition method.
We adopted these standards at the beginning of the first quarter of fiscal 2018
using the modified retrospective method. The adoption of these standards did not
have an impact on our Statements of Operations for the three months ended March
Stock-based compensation. We record stock based compensation in accordance with
the guidance in ASC Topic 505 and 718, which requires us to recognize expenses
related to the fair value of our employee stock option awards. This eliminates
accounting for share-based compensation transactions using the intrinsic value
and requires instead that such transactions be accounted for using a
fair-value-based method. We recognize the cost of all share-based awards on a
graded vesting basis over the vesting period of the award.
Equity Instruments. We account for equity instruments issued in exchange for the
receipt of goods or services from non-employees in accordance with FASB ASC
718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at
the estimated fair market value of the consideration received or the estimated
fair value of the equity instruments issued, whichever is more reliably
measureable. The value of equity instruments issued for consideration other than
employee services is determined on the earliest of a performance commitment or
completion of performance by the provider of goods or services as defined by
FASB ASC 505-50.
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